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Statutory Trusts & Insolvency

Posted on April 26, 2020 | Posted in Construction, Five Liners

Urbancorp Cumberland 2 GP Inc 2020 Ont CA

Section 8 of the Construction Act establishes a trust for money being passed down the ladder into the hands of a contractor or subcontractor. Section 9 of the Act establishes a trust for the contractor if the owner’s land is sold and net funds come into the hands of the owner. In The Guarantee Company of North America v. Royal Bank of Canada, the Ontario Court of Appeal held that the section 8 deemed statutory trust satisfied the criteria for a common law trust and that, accordingly, the money in trust had priority over the unsecured funds available to ordinary creditors under the Bankruptcy and Insolvency Act. In the Urbancorp case, the Ontario Court of Appeal came to the same conclusion for the section 9 deemed statutory trust, in this case regarding the Companies’ Creditors Arrangement Act. The CCAA is a sister statute to the BIA dealing with insolvencies. As far as the court was concerned, the fact that the monitor under the CCAA arranged for the sale of the land was irrelevant; the sale was in the owner’s interests regardless that it occurred in an insolvency process.


Jonathan Speigel


Written by Jonathan Speigel, the founding partner of Speigel Nichols Fox LLP, leads the litigation and construction practices.


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